What is total financial wealth in the economy

Assignment Help Econometrics
Reference no: EM131145652

Individual saving and aggregate capital accumulation

Suppose that every consumer is born with zero financial wealth and lives for three periods: youth, middle age, and old age. Consumers work in the first two periods and retire in the last one. Their income is $5 in the first period, $25 in the second, and $0 in the last one. Inflation and expected inflation are equal to zero, and so is the real interest rate.

a. What is the present discounted value of labor income at the beginning of life? What is the highest sustainable level of consumption such that consumption is equal in all three periods?

b. For each age group, what is the amount of saving that allows consumers to maintain the constant level of consumption you found in part (a)? (Hint: Saving can be a negative number if the consumer needs to borrow in order to maintain a certain level of consumption.)

c. Suppose there are n people born each period. What is total saving in the economy? (Hint: Add up the saving of each age group. Remember that some age groups may have negative saving.) Explain.

d. What is total financial wealth in the economy? (Hint: Compute the financial wealth of people at the beginning of the first period of life, the beginning of the second period, and the beginning of the third period. Add the three numbers. Remember that people can be in debt, so financial wealth can be negative.)

Reference no: EM131145652

Questions Cloud

Minimum requirement that a limited liability company have : Coco is considering forms of business organization for her confections business Coco's Cupcakes. Most states require that a limited liability company have
Accumulated depreciation equipment and depreciation expense : At the end of its first year, the trial balance of Jules Company shows Equipment $22,000 and zero balances in Accumulated Depreciation-Equipment and Depreciation Expense.
Provide a review of the victor thompson case : Provide a review of the Victor Thompson case. Describe the law enforcement operations, enforcement strategies, subsequent prosecution of the case, etc. Also, you will relate the reported or projected impact of the case on drug supply reduction in ..
How marketers attempt to sell children specific products : Describe how marketers attempt to sell children specific products and detail your thoughts on the nature of their tactics:
What is total financial wealth in the economy : What is total financial wealth in the economy? (Hint: Compute the financial wealth of people at the beginning of the first period of life, the beginning of the second period, and the beginning of the third period. Add the three numbers. Remember t..
Derive total financial wealth for the economy : Calculate consumption in each period of life. Compare this answer to your answer to part (a) of Problem 5, and explain any differences.
Stagg advertising companys trial balance at december 31 : Stagg Advertising Company's trial balance at December 31 shows Supplies $8,800 and Supplies Expense $0. On December 31 there are $1,100 of supplies on hand.
Identified the organization for report : Identified the organization for report.- Interviewed at least one key mid-level or senior-level manager.
Find the heat transfer by radiation to the window : Find (a) the heat transfer by radiation to the window; (b) the heat transfer by natural convection to the window; and (c) the fraction of heat transferred to the window by radiation.

Reviews

Write a Review

 

Econometrics Questions & Answers

  What are the r squares for the equations

What are the R squares for the equations? Which one is better? Can you provide an economic rationale to explain the difference? How well did the equations predict values for 2011 and 2012?

  How can the fed influence velocity

Is velocity high or low relative to trend during recessions? Why?

  What would you expect to be the return to stocks

Suppose that the CAPM is a good model of risk in the stock market. Suppose also that the average excess return on stocks is 10% and that the risk free interest rate is 1%. What would you expect to be the return to stocks with each of the following..

  What is the radial speed of ngc

The most intense light is emitted by the oxygen in NGC 7319. What is the radial speed of NGC 7319 relative to Earth

  Calculate the algebraic level of equilibrium output

This question considers a closed economy Keynesian model that is augmented to include transfers payments to consumers (Tr = Transfers) that increase consumers' disposable incomes and lower government savings. a) Suppose you had the following compo..

  What is wrong with this argument

Some analysts have argued that this poses a problem for the United States, because our comparative advantage lies in things we cannot sell on world markets. What is wrong with this argument?

  Use expenditure approach to compute gdp and calculate ndp

Below are hypothetical data for the economy in a particular year. There is no statistical discrepancy.Export 179Capital consumption allowances 79 Government current purchases of G & S 134 Indirect taxes (less subsidies) 76Wages, salaries, supplementa..

  Calculate threal interest rate and current inflation

A baker is considering expanding her busines by adding an additional oven to her kitchen. The new oven would cost $14,000. The baker expects the new oven to bring in additional profits of $15,800 after taking out the cost of running the oven.

  Which liner is cost effective on the basis of interest rate

A plastic liner will cost $0.90 per square foot initially and will require replacement in 15 years when precipitated solids will have to be removed from the pond using heavy equipment. This removal will cost $500,000.

  Determine extreme points of linear combination

Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200..

  What are the present worth values of drinking bottled water

If the average person drinks 2 bottles of water per day or uses 5 gallons per day in getting that amount of water from the tap, what are the present worth values of drinking bottled water or tap water per person for 1 year

  Find the profit maximizing price and quantity of monopolist

a. Find the profit maximizing price and quantity. b. Assume that ATC = $35 at the profit maximizing quantity. Calculate the monopolist's total profit. A monopolist's Demand, MR and MC curves ar

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd